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Portfolio Balance and Balance of Payments Sterilization

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  • Enders, Walter

Abstract

Current interest in the monetary theory of the balance of payments has spurred interest in both the static and dynamic and effects of central bank sterilization policies.— In particular, the monetary approach to the balance of payments demonstrates that an improper rate of monetary expansion will lead to an official settlements deficit or surplus. As sterilization policies alter the rate of growth of the domestic money supply, it is important to determine how sterilization affects the balance of payments. The ongoing debate concerning the relative merits of fixed versus flexible exchange rates also serves to underline the importance of balance of payments sterilization. Proponents of flexible exchange rates argue that monetary independence cannot be attained under a pegged rate regime, whereas advocates of fixed rates claim that sterilization can lead to monetary independence even if the exchange rate is pegged.

Suggested Citation

  • Enders, Walter, 1975. "Portfolio Balance and Balance of Payments Sterilization," ISU General Staff Papers 197510010700001020, Iowa State University, Department of Economics.
    • Handle: RePEc:isu:genstf:197510010700001020
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    References listed on IDEAS

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    1. Enders, Walter, 1975. "Portfolio Balance And Exchange Rate Stability," ISU General Staff Papers 197503010700001005, Iowa State University, Department of Economics.
    2. Levin, Jay H, 1972. "International Capital Mobility and the Assignment Problem," Oxford Economic Papers, Oxford University Press, vol. 24(1), pages 54-67, March.
    3. S. C. Tsiang, 1975. "The Dynamics of International Capital Flows and Internal and External Balance," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 89(2), pages 195-214.
    4. Johnson, Harry G., 1972. "The Monetary Approach to Balance-of-Payments Theory," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 7(2), pages 1555-1572, March.
    5. Komiya, Ryutaro, 1969. "Economic Growth and the Balance of Payments: A Monetary Approach," Journal of Political Economy, University of Chicago Press, vol. 77(1), pages 35-48, Jan./Feb..
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    1. Enders, Walter & Lapan, Harvey, 1976. "Portfolio Balance and the Assignment Problem in an Interdependent World," ISU General Staff Papers 197601010800001026, Iowa State University, Department of Economics.

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